Quick Answer
Reverse mortgage closing costs typically include an FHA mortgage insurance premium (2% of the home value), an origination fee (capped by the FHA), a HUD counseling fee, and standard third-party costs such as appraisal and title. Most of these costs can be financed into the loan, so the large majority of borrowers pay little or nothing out of pocket at closing.
FHA Mortgage Insurance Premium (MIP)
The largest upfront cost is the FHA mortgage insurance premium, set at 2% of the lesser of your home's appraised value or the FHA lending limit ($1,249,125 in 2026). On a $600,000 home, this is $12,000. There is also an annual ongoing MIP of 0.5% of the outstanding loan balance, which accrues monthly. This insurance is what funds the non-recourse guarantee.
Loan Origination Fee
This is the broker or lender's compensation. HUD caps origination fees for HECM loans: 2% of the first $200,000 of home value plus 1% of the remaining value, with a minimum of $2,500 and a maximum of $6,000. On a $500,000 home, the maximum origination fee is $6,000.
Appraisal Fee
An independent FHA appraisal is required to determine the home's current market value. Appraisal fees typically range from $300–$600 for a standard single-family home. This is usually the only cost paid out of pocket at the start of the process.
Third-Party Closing Costs
These include title insurance, title search, settlement services, attorney fees (where applicable), and recording fees. Third-party costs typically range from $2,000–$4,000 depending on the state and property.
HUD Counseling Fee
All HECM borrowers must complete an independent counseling session with a HUD-approved agency. The fee is typically $125–$250. This may be waived for low-income borrowers. The session is usually completed by phone and takes about 60–90 minutes.
Servicing Fees
Some lenders charge a monthly servicing fee ($30–$35) for managing the loan. This is disclosed upfront in the loan disclosures and reduces available loan proceeds if included.
Financing Costs Into the Loan
Almost all costs except the appraisal fee can be financed into the loan, meaning they are deducted from your available proceeds rather than paid out of pocket. This is why most borrowers pay nothing at closing. The trade-off is a slightly lower net proceeds amount.
Total Cost Example
On a $600,000 home with a 70-year-old borrower: FHA MIP = $12,000, origination fee = $6,000 (capped), appraisal = $500 (paid upfront), closing costs = $3,000, counseling = $175. Total: ~$21,675 financed into the loan. If the borrower's principal limit is $330,000, their net proceeds after costs are approximately $308,000.
